Household spending in Japan is increasing, spurred on in part by the government's economic policies.

by
Leika Kihara

Japan's unemployment rate has fallen to a new 24-year low, dropping to 2.7 per cent in November as job availability rose to a nearly 44-year high.

It was the lowest jobless rate since December 1994. The jobs-to-applicants ratio hit a 44-year high, the official Statistics Office said. Stable payrolls moderately pushed up consumption and inflation in Japan.

The unemployment rate fell 0.1 of a percentage point from October, its first decline in five months. A reading lower than 3 per cent is interpreted as the economy being at full employment.

Household spending rose 1.7 percent in November from a year earlier, far exceeding forecasts for a 0.5 percent increase.

Japan's households spent more than expected in November while consumer inflation ticked up and the jobless rate hit a fresh 24-year low, offering the central bank some hope an economic recovery will drive up inflation to its 2 percent target.

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But the increase in prices was due mostly to a boost from rising fuel costs that is seen fading in 2018, keeping the Bank of Japan under pressure to maintain its huge monetary support even as other central banks seek an end to crisis-mode policies.

Minutes of the BOJ's October rate review showed that while most central bank policymakers saw no need to ramp up stimulus, they agreed on the need to sustain "powerful" easing for the time being.

"There's a chance inflation may gradually accelerate toward the fiscal year beginning in April," as a tightening job market pressures companies to raise wages, said Takeshi Minami, chief economist at Norinchukin Research Institute.

"But inflation remains distant from the BOJ's 2 percent target, so the central bank will probably maintain its current policy framework."

Spending was driven by broadbased gains, with households loosening the purse strings for items such as refrigerators, washing machines, and sporting goods and services such as eating-out and travel.

Behind the improvement is a slow but steady rise in household income. Wage earners' disposable income rose 1.8 percent in November from a year earlier, suggesting that higher incomes have encouraged consumers to open their wallets.

A stock market boom is also giving households more purchasing power. Japan's top 4 department stores all saw sales increase in November from a year earlier on brisk demand for luxury items.

The nationwide core consumer price index (CPI), which includes oil goods but excludes volatile fresh food prices, rose 0.9 percent in November from a year earlier, government data showed on Tuesday, marking the 11th straight month of gains.

The pace of price growth was just ahead of October's 0.8 percent and a median market forecast of the same rate.

Despite the increase seen in wages, Prime Minister Shinzo Abe has urged companies to raise wages by 3 percent or more next year, keeping pressure on firms to spend their huge cash pile to broaden the benefits of his stimulus policies.

A Reuters poll published earlier this month found two-thirds of Japanese firms think the government's push to raise wages by 3 percent is a tall order, with some dismissing it out of hand.